Canada’s one-two punch

We tend to forget that until just a few years ago when the United States became the biggest producer of oil and natural gas, the Canadian market was our biggest supplier; not to mention the fact that they supply part of the American East Coast corridor and other parts of the borderland region with electricity. Theoretically, they still have the capacity to, for example, turn off the switch in the Province of Quebec and leave New England in the darkness and stop the flow of oil through the interconnected pipeline network and impact our supply of oil and natural gas. That is why it is important to know what is happening with Canadian energy policy, yet our media keeps us distracted and misinformed about the issues that matter. Rosseane Barr is the center of attention while the Canadians make a critical decision to divert oil away from the American market and toward the Chinese market.

Canada and the United States are interdependent in many ways, including our vertical market integration and our national security systems. Nevertheless, Donald Trump’s revision on trade policies with Canada has caused alarm among Canadian policy makers, business leaders and citizens at large, since the protectionist approach has translates into a threat to Canada’s national security. The threat to revise the North American Free Trade Agreement (NAFTA) and to impose tariffs on Canadian steel and aluminum forced the Canadians to revise their national global strategy, particularly because their economy is highly dependent on American consumption.

There is a high level of interdependency between the two economies. Both nations have incrementally given up sovereignty in exchange for mutual benefit, but the American market was and remains in an advantageous position because of the size of its market. Canada, for example, export 90 percent of its agricultural production to the global market, but the United States remains its biggest buyer, and if the United States stops buying from Canada then it would force them to seek new foreign markets. Seeking foreign markets takes time, and these negotiations require planning, strategy and research, ultimately leaving many Canadians unemployed.

Today’s announcement by the Canadian government regarding the Trans Mountain pipeline project is a clear example of how America’s protectionist policies are forcing Canadians and other nations to redefine and implement their own nationalist and protectionist strategies. The problem is that Canada is our biggest supplier of energy and that the revisionist policy could shift the direction of history, turning them into the biggest supplier of oil and other strategic resources to the Chinese market.

In the accelerating global market of today, and prior to the Trump administration, it was commonly agreed under each administration that the American and Canadian dynamic was untouchable. Tweaking the Mexican-American relation is one thing but tweaking the Canadian-American relation is a serious threat to American national security. The Mexicans were not able to build the level of interdependence that the Canadians were able to achieve with the American market. The Reciprocity Agreement of 1854 between Americans and Canadians began a process of integration that has intertwined the two markets, just look at the NHL finals or the dependency of the Maine economy on Canadian consumers; not to mention the fact, once again, that Hydro-Quebec can turn the switch off at any time and leave millions of people in the United States without power.

Now the Canadian federal government has approved the option to buy the Trans Mountain pipeline in order to move oil from Alberta to Vancouver for export to the Asian markets, and particularly the Chinese market; it is clear that they are no longer interested in depending on the American market. The days of cooperation between the two countries are over; as indicated Premier of Alberta, Rachel Notley, Canada can no longer rely on selling cheap oil to the Americans and must take advantage of the Asian demand that guaranties higher returns for Canadians.[1]

If the 2014 Canadian-European Union initiative to sign the Comprehensive Economic and Trade Agreement (CETA) free trade agreement was not a clear sign to the Americans that Canada was interested in diversifying its trade relations and reduce their dependency on the United Sates, this week’s move to buy the Trans Mountain pipeline should convince the current administration that bullying key allies like Canada might backfire in a globalized economy. The Trump initiative to pressure Canada, the European Union, Mexico, Japan, and other key allies might have worked during the Cold War era but not under the present dynamics of globalization.[2] As the most recent Canadian initiative shows, Canadian policy makers and business leaders have done their research and now feel confident that opening to China and other Asian markets is more beneficial then relying on the American market. China, the Pacific economies, the European Union, and the rest of the global market welcome the initiative because they understand that this will weaken the United States in the long run.

The Trump administration’s pressure to renegotiate NAFTA has forced Canada against the ropes, but the CETA alternative, the Trans Pacific Partnership initiative, and the most recent decision on the Trans Mountain pipeline indicate that they have options. The United States, on the other hand, is running out of options. Dismantling the Canadian partnership puts the United States in a vulnerable position, as Canada begins to tailor its vast natural resources to the global market and away from American interests. Loosing our exclusivity to the Canadian market threatens our national security, as the access to strategic resources is redirected to our key competitors.

Not only will the Chinese have access to vast oil resources but they will find in the Canadian market a back door into the American and the Western Hemispheric markets. As we close our economy the rest of the world opens it up. Going against the current will weaken our global competitiveness; considering that we engineered the current global market system in order to benefit us first. Is President Trump’s blast to the past in order to tentatively secure a reelection worth the nation’s isolation from the global market system? Is tearing apart what secured our position of power around the world worth a reelection? We might find ourselves like emerging markets around the world, retracing our steps after four years of wrong decision-making.

American foreign policy has never been centered on a short-term strategy for short-term political gain. On the contrary, success has relied on long-term political, diplomatic, and economic policy that has guarantied long-term domestic and international stability. As it is commonly said now, we are now navigating “unchartered waters.” Canada has given us a quick “one-two punch” and escaped the ropes.

 

[1] “Expanding the Trans Mountain Pipeline Benefits All Canadians,” Keep Canada Working, 2018. Accessed May 30, 2018. https://keepcanadaworking.ca/?gclid=EAIaIQobChMIs5TM_L-w2wIVBcJkCh2fBw3_EAAYASAAEgJ1jvD_BwE

[2] CETA was signed in 2017 is waiting for parliamentary approval by European Union member states.

Stefano Tijerina

About Stefano Tijerina

My name is Stefano Tijerina and this blog’s objective is to connect Maine’s social, environmental, economic, cultural, and political issues to the global system, centering on how the local impacts the global and how the global impacts the local or what is known in Global Studies as the "Glocal" effect. In our present era of globalization it is crucial for the general public to understand how the new dynamics of the international system impact our lives here in Maine and how our local decisions impact the earth.